Confiscation of factory goods and direct bond security appropriation fail without proof of clandestine removal or proper bond enforcement.

Fully manufactured excisable goods found inside the factory were held not liable to confiscation merely because they were not entered in R.G. 1, where there was no evidence of clandestine removal, preparation for removal, or intent to evade duty. Voluntary payment of duty before the show cause notice also weighed against confiscation. The text further states that cash security furnished under bond cannot be directly appropriated unless the bond procedure is first followed, including requiring production of the goods and enforcing the bond in the prescribed manner. The confiscation and appropriation directions were therefore set aside.

---

---

Issues: (i) Whether fully manufactured excisable goods lying within the factory but not entered in the statutory register were liable to confiscation under the Central Excise Rules. (ii) Whether the cash security furnished under the bond could be directly appropriated against the confiscation without first requiring production of the goods and enforcing the bond.

Issue (i): Whether fully manufactured excisable goods lying within the factory but not entered in the statutory register were liable to confiscation under the Central Excise Rules.

Analysis: The goods were found in fully manufactured condition inside the factory and were not shown to have been removed clandestinely. The finding of non-entry in R.G. 1 by itself was treated as insufficient for confiscation in the absence of evidence of preparation for removal or intent to evade duty. The order also did not indicate any redemption fine, and the duty had been paid voluntarily before the show cause notice.

Conclusion: Confiscation of the factory goods was not sustainable and the issue was decided in favour of the assessee.

Issue (ii): Whether the cash security furnished under the bond could be directly appropriated against the confiscation without first requiring production of the goods and enforcing the bond.

Analysis: Where goods released under bond are not first called upon to be produced, direct appropriation of the security does not conform to the bond procedure. The proper course is to enforce the bond in the manner stipulated, after requiring production of the goods, before resorting to recovery of the secured amount.

Conclusion: Direct appropriation of the security amount was held to be illegal and invalid, and the issue was decided in favour of the assessee.

Final Conclusion: The confiscation and appropriation directions were set aside, and the appeal succeeded with consequential relief according to law.

Ratio Decidendi: Fully manufactured goods remaining in the factory and not shown to have been clandestinely removed are not liable to confiscation merely for non-entry in the statutory records, and security furnished under bond cannot be appropriated without first following the bond-enforcement procedure.

---